A business commonly has all sorts of valuable assets. Most businesses have some combination of assets such as real estate, equipment, inventory, cash, receivables and patents just to name a few. One class of assets that can be misunderstood, if not entirely overlooked, are the Trade Secrets of a business. Regardless of size, virtually every business will have Trade Secrets.

Here is a little secret, there are far more Trade Secrets out there than you think. A common misconception is that Trade Secrets have to be highly technical in nature, or that only very large tech companies have them. This is not true. One of the most commonly litigated Trade Secrets is something that almost every business has…. or at least should have if it intends to make any money – Customer Lists.

Just like other assets of a business, Trade Secrets need protection. While not every customer list is a Trade Secret warranting protection, Courts routinely are confronted with cases where (former) employees and competitors wrongfully take customer lists. They can be extremely valuable to others seeking a quick competitive advantage. Here are just a couple examples: (i) customer lists and pricing information protected where former employee admitted it was confidential. Flake v. EGL Eagle Global Logistics, 2002 WL 31008136 (Tex. App.—Houston [14th Dist.] Sept. 5, 2002, no pet.); and (ii) customer lists with prior purchase information and customer/buyer preferences protected. Zoecon Indus. v. American Stockman Tag Co., 713 F.2d 1174 (5th Cir. 1983).

So what is a Trade Secret?  A Trade Secret is defined in Texas as:

Information, including a formula, pattern, compilation, program, device, method, technique, process, financial data, or list of actual or potential customers or suppliers, that: a) derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and b) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.  

Section 134A of Texas Civil Practice & Remedies Code

The Trade Secrets of a business can certainly go beyond mere customer lists. In fact, while the analysis of what constitutes a Trade Secret is case specific, the following have all previously been found in some circumstances to be Trade Secrets: marketing strategies, pricing data, business methods, vendor/supplier lists and manufacturing processes.

Now that you know your business likely has Trade Secrets, taking reasonable measures to protect the Trade Secrets is vital. You wouldn’t leave cash of a business lying around unprotected. The same goes for Trade Secrets. Like other assets of a business, Trade Secrets commonly come under attack from internal and external sources in the form of theft and misappropriation. Taking smart steps to safeguard the Trade Secrets of a business with the use of Non-Disclosure Agreements and other company policy, enforced by Injunctive relief if necessary, is one way.  Protect it or lose it.

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Scheef & Stone LLP Partner, Mark L. Hill, has been elected as the President of the Collin County Bar Association (CCBA) effective July 1, 2016 for a one-year term. Mark has served on the CCBA Board of Directors for several years, most recently as the association’s Vice-President. He was previously a founding member and Chair of the Civil Litigation Section of the CCBA.

CCBA logoThe CCBA is the largest bar association serving the legal community practicing or residing in and around Collin County, Texas; which includes Frisco, McKinney, Allen and Plano, among numerous other smaller communities. It works closely with the judiciary and local leaders in Collin County to create a professional, cordial, and efficient relationship with the court system for all practitioners. “Collin County, including its legal community, is growing at an unprecedented pace and I am extremely proud to lead the Collin County Bar Association during this particular time.”  For the complete release visit here.

Mark offices in the firm’s Hall Park location in Frisco, Texas where his practice involves handling complex business disputes and commercial real estate matters. He represents both corporate and individual clients in state and federal courts throughout Texas.